May 22, 2023 - Fundamental Reminder

☆ 9:15 CNY Loan Prime Rate 1Y (May/22)

It is expected to remain unchanged at 3.65%.

☆ At 20:30, the 2025 FOMC voting member and St. Louis Fed President Bullard speaks on the U.S. economy and monetary policy. Bullard previously said that banking concerns are being overemphasized and that he supports further rate hikes as insurance against inflation.

☆ The next day at 2:30, NYMEX New York crude oil June futures are affected by the shift for the month, the last trading on the floor will be completed at 2:30 on May 23 and the last trading on the electronic market will be completed at 5:00 am. Please pay attention to the expiration for the month announcement on the trading floor to control the risk. In addition, U.S. oil contract expiration time on some trading platforms is usually one day earlier than the official NYMEX, please pay more attention.

Market Overview

Review of Global Market Trend

On Friday, as debt ceiling negotiations resumed at an impasse and Yellen's speech reignited market concerns about the stability of the banking sector; Meanwhile traders cut their bets on another Fed rate hike after Powell's slightly dovish speech, spot gold pulled up sharply during the U.S. session, eventually closing up 0.94% at $1,976.56 per ounce. Despite recovering some of this week's losses, it still recorded its worst one-week performance since February. Spot silver rose more than 2% at one point, eventually closing up 1.41% at $23.83 per ounce.

The U.S. dollar index shuddered to the downside, falling away from its nearly seven-week high, touching the 103 mark during the session, before rebounding in late trading to close down 0.348% at 103.21. U.S. Treasury yields closed higher, with the U.S. 10-year Treasury note hitting a high of 3.72% and finally closing at 3.682%, which was the largest one-week gain since December last year; the U.S. two-year Treasury note recorded the largest one-week gain since September last year.

Crude oil made an inverted V-shaped move on Friday, but still reaped its first weekly gains in a month. WTI crude oil dived in the U.S. session, erasing all intra-day gains and eventually closing down 0.29% at $71.93 per barrel due to concerns that the U.S. Congress could not agree on raising the debt ceiling and triggering a default, thus hurting the economy and reducing the outlook for dampening demand; Brent crude oil fell back to near $75 and eventually closed down 0.24% at $75.89 per barrel.

U.S. stocks opened higher and lower, dragged by the suspension of debt ceiling negotiations three major stock indexes turned lower during the day, the Dow closed down 0.33%; Nasdaq closed down 0.24%, but closed up for the fourth consecutive week; S&P 500 index closed down 0.14%, which was the largest weekly gain in seven weeks last week. KBW Bank index closed down nearly 1%, the popular Chinese stocks diverged, Azure rose more than 3%, ideal, New Oriental rose more than 1%, iQIYI fell more than 5%, Luckin coffee and JDcom fell more than 2%.    

European stocks closed up collectively, Germany's DAX30 index closed up 0.69%, closing at a record high; FTSE 100 index closed up 0.19%; Europe's Stoxx 50 index closed up 0.64%.

Market Focus

1. Debt ceiling-McCarthy agreed to meet with Biden on Monday, with representatives from both sides resuming negotiations first. Biden: is considering using the 14th Amendment to the Constitution to lift the debt ceiling; gave options to cut spending. Yellen said the debt ceiling deadline is still in early June; McCarthy: Biden's position in the debt ceiling negotiations has changed; a large number of compromises have been outlined.

2. Fed-Kashkari: likely to support a pause in rate hikes in June, but oppose any announcement that the Fed has stopped raising rates.

3. ECB President Lagarde: According to the information I have so far, we will not suspend interest rate hikes, and the ECB's policy decisions depend on data.

4. Iraqi Oil Ministry: approved the construction of an offshore crude oil export pipeline in the south, aiming to increase the export capacity of southern ports by about 500,000 bpd.

Geopolitical Situation

Institutional Perspective

01

Goldman Sachs

Goldman Sachs economists: The U.S. Treasury is likely to fall through the $30 billion cash threshold for so-called “meeting federal obligations” (government operations, interest payments on debt, etc.) on June 8-9

02

SOCIETE GENERALE

Societe Generale: The 10-year Bund yield is likely to stay above 2.5% in the near term

May 19 - The recent sell-off in German bunds has pushed the 10-year Bund yield close to 2.50%, and it is likely to stay above that level for some time as the European Central Bank continues to warn of the dangers of inflation, Societe Generale interest rate strategists wrote in a note. “However, yields should remain within a wide range amid declining volatility, as they usually do at the end of a rate hike cycle.”

03

MUFG

MUFJ: The dollar rose on easing debt ceiling concerns and lower rate cut bets

May 18: The dollar rose against most other G10 currencies as comments from U.S. politicians increased optimism that a deal to raise the debt ceiling would be reached, boosting risk appetite and in turn reducing bets on future U.S. rate cuts, Mitsubishi UFJ analyst Derek Halpenny said. Earlier, President Joe Biden said talks with Republicans had been productive and a default could be avoided.